1. Kevin Ryan’s garage hobby has turned into a lucrative
career 27 years later. His shop in Westminster is small and
mostly anonymous with a tinted black window. Ryan has
been riding a trend in the guitar industry: an increasing
demand for high-quality, custom steel string acoustics.
Before he started building instruments, solo guitar makers
were lucky to give away their instruments for $400. His
custom-made acoustic guitars today fetch upward of
$30,000 each. Story on Page 3
Kevin Ryan
Guitars builds
custom-made
instruments
that sell for
top dollar.
I grew up really poor, so for me,
I never really expected to make
a lot of money and the fact that there
are guitars selling for a lot of money, I
just think, ‘Well this is great.’ ”
K E V I N R Y A N , A B O V E
‘‘
INPURSUIT
OFPERFECTION
ANGELA PIAZZA, ORANGE COUNTY REGISTER
STATUS UPDATE: Orange County entrepreneur
helps fight mosquitoes in Uganda. Page 2MADE IN O.C.TODAY’S
FOCUS
WEDNESDAY, SEPT. 4, 2013
BUSINESS
Our occasional look into
business patterns explores the
latest merger mania:
PLUS: Communication gi-
ant Verizon is making a
huge, nervy bet on its own
business, agreeing this
weekend to pay $130 billion
to Britain’s Vodafone for the
45 percent of its namesake
wireless business Verizon
doesn’t own.
Why? Ponder your own
ever-growing wireless bill
and then know that this
business – with deep Cali-
fornia roots – spits out $20
billion-plus in annual oper-
ating profits.
Still, $130 billion is a lot of
money. It’s curiously rough-
ly equal to the Wall Street
value of all of Verizon, which
also owns major East Coast
landline phone companies.
Or it’s roughly the annual
gross domestic product of
Nevada.
Or, for the same money,
Verizon could have bought
all the stock of the entire
U.S. auto industry – Gener-
al Motors, Ford and Chrys-
ler (through its owner, Fiat).
MINUS: Microsoft an-
nounced a curious wireless
deal of its own Tuesday: It’s
buying the handset-making
LANSNER’S SCORECARD
Wireless deals don’t look
like clear connections
JONATHAN LANSNER
REGISTER COLUMNIST
business of Finland’s Nokia.
The U.S. computing pow-
erhouse is trying to win
greater share of the wire-
less game, where it badly
trails Apple and Google, to
name a few. This deal gives
Microsoft control of the
cellphones that handle its
own wireless system.
Consider the giant dol-
lars of the Verizon deal –
and you might dream of be-
ing a ground-floor investor
in the wireless game. Imag-
ine that you had bought
shares of the global market
leader in cellphone-making
way back in 2000. Namely,
Nokia!
So much for early
entrants: Nokia
shares – even
after the
news that
Microsoft
is paying
$7 billion for
Nokia’s handset
business – have fallen 90
percent-plus from their
peak of 2000.
EQUALS: Stories like No-
kia’s fall from power – plus
many merger misadventur-
es in recent years – scare al-
ready penny-pinching
CEOs from the deal making
scene.
A recent tally of modest-
size acquisitions – so-called
midmarket mergers –
shows that in July only 193
middle-market deals were
made, according to invest-
ment bankers at R.W. Baird.
That’s the slowest month
since 1995. Those deals
were worth $26 billion –
one-sixth less than in July
2012.
Plenty of academic re-
search shows that mergers
fail to meet pre-deal finan-
cial goals more than half of
the time. Plus, there’s a ris-
ing stock market. That
makes many compa-
nies very pri-
cey to buy.
That’s
why CEOs are
as reluctant to
hire deal-making
investment bank-
ers as they are to add
worker bees.
Shares of Capstone Financial Group
Inc., an investment banking and wealth
management firm headquartered in Ir-
vine, are expected to begin trading pub-
licly today.
Executives said the
move will allow the com-
pany to raise capital to
support Capstone’s rap-
idly expanding oper-
ations.
“The purpose is so we
can make strategic ac-
quisitions to grow the
firm,” said Chief Execu-
tive Darin Pastor. “We have three acqui-
sitions (that will) close just after we go
public.”
Launched late last year by a team of
advisers from Prudential Financial Inc.,
Capstone has expanded to 65 employees
from five. In addition to its 10,000-
square-foot headquarters, the firm,
which includes Capstone Affluent Strat-
egies and two other subsidiaries, has 10
smaller offices around the country.
Pastor said he hopes to grow the firm
to about 200 employees, and he expects
to do that in part through acquisition. He
would not disclose details about the
three acquisitions in the works other
than to say they include wealth manage-
ment and advisory businesses.
Capstone’s growth push reflects a
broad trend in the wealth management
industry. A recent report from research
firm Aite Group found that as the econo-
my has begun to recover, wealth man-
agement firms of all sizes have been ag-
gressively expanding through acquisi-
tions and partnerships to take advantag-
es of cost savings that come with greater
size.
Capstone is expected to begin trading
publicly on the OTC Bulletin Board, a
Irvine
wealth
manager
to go
public
Trading is to begin today
over the counter. The
company, formed late last
year, seeks rapid growth.
SEE CAPSTONE ● PAGE 3
RICHARD
CLOUGH
REGISTER
WRITER
MARKET RECAP
10-year
Treasury:
Close: 2.86%
Change: +0.07
Oil per
barrel:
Close: $108.54
Change: +$0.89
O.C. gas
prices:
Gallon: $3.837
Change: +0
Dow
Industrials
Close: 14,833.96
Change: +23.65
Nasdaq
Index
Close: 3,612.61
Change: +22.74
S&P 500
Index
Close: 1,639.77
Change: +6.80
MORE ON PAGE 5
SCHOOLYARD RUMBLE
Lunchables has a new competitor,
Revolution Foods Meal Kits. The kits
are the first foray
into the grocery
store by Revolution
Foods, an Oakland
company founded by
two women seven
years ago to supply
school cafeterias
with healthier prepared foods. Page 4
MICROSOFT-NOKIA DEAL
Microsoft said it had reached an
agreement to acquire the handset and
services business of Nokia for about
$7.2 billion in an audacious effort to
transform Microsoft’s business for a
mobile era that has largely passed it
by. Page 5
MODEST STOCK GAINS
The Dow logged modest gains as
renewed worries about a U.S.-led
attack on Syria dampened an early
rally. The index was also held back by
losses for Microsoft and Verizon.
Page 5
MORE INSIDE
The monthlong blackout of CBS and
Showtime programming for Time Warner
customers came to an end Monday, res-
toring service for 2 million
customers in Orange
County and Los Angeles.
But cable and satellite TV
watchers should expect
similar disputes to contin-
ue for years.
At the core of the dis-
putes are the ballooning
fees paid by cable and sat-
ellite companies to show
broadcasters’ program-
ming. Those fees will double, from $3 bil-
lion this year to $6.1 billion by 2018, ac-
cording to Robin Flynn, a senior analyst at
SNL Kagan.
The fees come from a 1992 law that let
broadcasters like CBS ask for a cable re-
transmission fee for their programming.
That fee provides broadcasters a revenue
stream in addition to advertising – and
hands them negotiating power.
A lot has changed in 21 years: the Inter-
net arriving, for one thing. The 1992 re-
transmission rules tip the balance of nego-
tiations in favor of broadcasters, say ana-
lysts and critics, because cable providers
now have some real competition, partic-
ularly from satellite companies.
“The cable industry regrets the fact
Expect more
blackouts
over cable
fee disputes
SEE CABLE ● PAGE 3
IAN
HAMILTON
REGISTER
WRITER
SEC: Business DT: 09-04-2013 ZN: 1 ED: 1 PG #: 1 PG: Cover_D BY: wfawthrop TI: 09-03-2013 17:47 CLR: CMYK